Wind Turbines - Financial Examples
Due to requirements of the "Real Assurance Scheme", we are unable to provide any further financial examples, as we have done previously, despite the popularity of these. Instead, we will shortly be revamping our Case Studies page to include some new studies which show actual production being achieved by some of our customers
Renewable Obligation Certificates Frequently Asked Questions
Q. What is the Renewable Obligation?
The Renewables Obligation (RO) and the Renewables Obligation Scotland (ROS) were introduced on the 1st April 2002 by the Government to encourage the development of renewable energy and help reduce carbon emissions by making it a statutory requirement for all licensed electricity suppliers, to produce evidence that they source a pre determined proportion of their power from renewable generation annually or else pay a penalty. The obligation runs until 2027 when all suppliers will have to ensure that they meet the target of 15.4 % of their power generation, from renewable sources.
Q. Who administers the Renewable Obligation Scheme?
The office of Gas and Electricity Markets (Ofgem) is responsible for implementing, monitoring, and enforcing compliance with the scheme
Q. What is a Renewable Obligation Certificate (ROC)?
Ofgem require suppliers to produce evidence of their compliance of the scheme by producing green certificates referred to as Renewable Obligation Certificates (ROCs) Each ROC represents one Megawatt Hour (MWh, 1,000 units or 1,000 kWh) of renewable electricity generated. ROC's are awarded to renewable generators who are accredited with OFGEM. Therefore if you are a renewable generator and are accredited with OFGEM to receive ROCs for every MWh of electricity you generate, the ROCs can be sold to electricity companies/suppliers providing an annual income. This would be in addition to revenue received on all exported units of electricity, and help reduce payback time. It is important to note that you are eligable to claim ROC's on all the energy you produce, even if you use it yourself!
Q. How much is a Renewable Obligation Certificate (ROC) worth?
The government sets the values of ROCs the price increases each year with inflation. At the moment (2006-2007) the “Buy Out” price as its called, stands at £33.24 per megawatt hour (MWh). ROCs are bought and sold in the market place by large generators, traders, brokers and electricity suppliers. Market prices vary on a daily basis. To see recent ROC prices look at the Non-Fossil Purchasing Agency website http://www.nfpa.co.uk/
Some recently announced news which is extremely benefical to small generators is the announcement that from the 1st of April 2009, small turbines (<50 kW) and other sources of microgeneration, will be eligible for "Double ROC's). This is fantastic news for small turbines, and greatly improves the payback period.
Q. How does a generator become accredited?
Ofgem is responsible for accrediting generators.
Electricity generators can apply to Ofgem to prove their generation comes
from eligible renewable sources. .
Q. How do I find out if my site is eligible for accreditation under the Renewables Obligation Order?
Any generator can establish with Ofgem if their turbine is eligible under the criteria detailed in the Order or they can ask an intermediary / agent to do this for them.
A generator can decide to take the time and effort to fill out the “Application for Accreditation Questionnaire for Generators” and Ofgem will progress the application free of charge. If a generator chooses to use an intermediary to complete the questionnaire and progress the application with Ofgem as an “Agent” for that Generator then the intermediary / agent will charge an administration fee from £85. However, this charge will only be made if Ofgem accepts the application
The questionnaire and associated guidance documents can be found on Ofgem's web site at:
Q. What is the process for application to Ofgem?
In order to qualify for accreditation a questionnaire must be completed download copies from http://www.ofgem.gov.uk/
Two copies along with any additional material must be sent by post, fax and email applications will not be accepted.
Ofgem require detailed information on the metering of the output from the site which includes the following:
o Details of the meter type,
o Whether the meter conforms to metering standards, and if so what standard,
o The accuracy level of the meter, and
o A meter serial or identifier number.
The meter reading the output from the renewable plant must be one that is certified by Ofgem. A list of all meters certified by Ofgem can be found on the Ofgem website at:
Q. What is the process for getting a generator accredited for ROCs by Intermediary?
If a generator chooses to progress an application for accreditation under the Order via intermediary rather than by himself/herself the following process will occur:
To establish if the generator is eligible for accreditation with Ofgem, the intermediary completes the accreditation form on behalf of the owner of the renewable generation. Certain site specific information is needed for the application but they liase with the generator to make sure this is all accurate and complete.
The next step, as owner is to sign a declaration, which is on the accreditation form, then write and sign a letter that Ofgem require, informing them that you have instructed an agent to act on your behalf.
The owner of the generator / wind turbine will receive a letter from Ofgem when the site has been accredited providing a personal “Accreditation Number”
Q. What happens if I consume all the electricity I Produce? / I am Not grid connected?
It does not matter if you consume all or part of the electricity produced. The electricity generated, classified as “eligible own use”, is potentially eligible for ROCs, if it is used in any one or all of the following ways:
1. All or part of the electricity generated is exported to the Grid,
2. All or part of the electricity is used by the operator of the plant for their own use on site. This may be for supplying their home, farm or a factory or warehouse, or
3. The electricity is supplied via a private network to a third party on the generators site; this may be a person who rents a property on the land such as a house or farm.
An agreement between the turbine owner and the electricity supplier such as a “buy and sell back” may need to be put in place in order for the generator to qualify for ROC accreditation.
Q. How can a “buy and sell back agreement” be made?
If the site is an “eligible own use generator” a “Sell and Buy Back electricity agreement” needs to be put in place. When the intermediary is a licensed electricity supplier a contract is put in place between them (acting as the holder of the electricity licence) and the generator
This document states that the electricity generated by the renewable plant is sold to the intermediary (as the electricity supplier) and then simultaneously the intermediary sells it back to the generator for the generators eligible own use.
In practice this does not occur as the generator
simply supplies the electricity to himself for his own use. However, under the
RO legislation the generator must have his electricity supplied by a licensed
supplier to make that electricity eligible for ROCs, hence the Sell and Buy Back
Agreement. 
A Copy of this agreement plus the confirmations that detail the names and addresses of the parties, the volume of electricity sold and the price applying to that electricity are then sent to Ofgem.
Many customers get confused between the price for the ROCs and the prices detailed in the Buy and Sell Back Agreement for electricity.
The Buy and Sell Back Agreement is an administrative necessity and as the price of the electricity detailed in the contract is applied to both parties the transaction cancels itself out so no money (or electricity) changes hands.
The Buy and Sell back is in no way related to the ROCs. The ROC price agreed between the Client and INTERMEDIARY is detailed within a separate “Management Services Agreement”.
Q What is a management service agreement?
The ROC price agreed between the Client and an intermediary / agent is detailed within a separate “Management Services Agreement”.
The last document the customer receives is the “Management Services Agreement”. This is a contract between the customer and intermediary that details the term of the agreement, the services that the intermediary will provide to the customer and the price the customer will receive for his ROCs
This commercial arrangement is usually for a period of 5 years although the customer can terminate the agreement either immediately, if there is a material breach of the contract, or at any time for any reason by giving 3 months notice.
It is important that the intermediary receives all of the information and that the customer signs it, as Ofgem will not process the application until the intermediary has provided them with copies
Once Ofgem is in receipt of all of the relevant information they can begin the accreditation process. The accreditation covers Levy Exemption Certificates (LECs) and Renewable Energy Guarantee of Origin (REGO).
Q. How long will the application take?
If all the information provided is concise and complete ROCs are usually awarded within three months of application. Ofgem will accept backdated meter readings so it is important to record metered output monthly from the beginning of electricity production. So that you gain accreditation from the date that your application to Ofgem is received.
Q. What is required once accreditation has been received?
Once the site is accredited and a personal accreditation number has been awarded the intermediary will then require the Generator to provide them with the following:
A copy of any documentation sent to the Generator by Ofgem,
Monthly meter readings from the site.
Even though small generators only receive their ROCs from Ofgem on a yearly basis (1st April to 31st March) the intermediary will still require quarterly or six-monthly meter readings to enable monitoring output. It is best practice to keep recording meter readings monthly.
Q. What are the commercial options?
The ROC price agreed between the Client and intermediary /agent is detailed within a separate “Management Services Agreement”.
Intermediary companies
can offer a fixed price contract per ROC or a commission-based contract relating
to the price of ROCs sold in the market place at any given point in time. The percentage commission charged varies
with the size and output of the plant. 
This commercial arrangement is usually for a period of 5 years although the customer can terminate the agreement either immediately, if there is a material breach of the contract, or at any time for any reason by giving 3 months notice.
The government sets the values of ROCs the price increases each year with inflation. At the moment (2006-2007) the “Buy Out” price as its called, stands at £33.24 per megawatt hour (MWh). ROCs are bought and sold in the market place by large generators, traders, brokers and electricity suppliers. Market prices vary on a daily basis. To see recent ROC prices look at the Non-Fossil Purchasing Agency website www.nfpa.co.uk
Q. What is a Renewable Energy Guarantee of Origin (REGO)?
An EU wide green power certification system. The REGO scheme will enable renewable energy producers to show that their electricity comes from a green source. The scheme is open to all producers of green energy, including the smallest domestic generators. It aims to encourage the development of renewable energy projects by enabling generators to provide their buyers with an assurance of the ‘greenness’ of their product.
All producers of electricity from renewable energy sources will be able to request these electronic certificates, which will be issued by the energy regulator, Ofgem. The scheme should be particularly helpful to small generators, which do not generate enough electricity to qualify for Renewable Obligation Certificates (ROCs).
The REGOs will be issued in units of 1kWh. The scheme works alongside the existing ROCs. A REGO has no value at present but it is envisaged that within the next few years REGOs will be important so we advise that the Generator keep the REGO in a safe place once Ofgem provides it. In parallel there are the Levy Exemption Certificates (LECs) given to companies who make use of renewables to escape the Climate Change Levy.
Q. What are Levy Exemption Certificates (LECs)?
Ofgem issues one LEC for every MWh of renewable electricity generated. All industrial customers who consume “brown” electricity generated from Fossil Fuels rather than “green” renewable electricity are charged a levy for this electricity. If customers purchase green electricity with attached LECs then they do not pay the levy. If the generator exports some or all of his electricity then it may be possible to arrange a supply contract with a “green” supplier called Green Energy. Green Energy will buy the LECs from the generator at a value of approximately £3.50 per LEC.
Links
Trade Link Solutions Ltd. provide a range of services including independent advice. They also project manage the operations of several small renewable projects on a day to day basis which includes the buying, selling and trading of ROC’s on behalf of clients
Green Energy (UK) PLC have a strategic relationship with Trade Link Solutions Ltd. that provides the customer with the ability to sell their excess electricity and LEC's. This means that the customer gets the benefit of a complete package dealing with all the aspects of capitalising on the electricity that the renewable energy system generates.
Good Energy will pay each UK customer per unit of electricity generated through their renewable energy device.
This page was last updated on 09/08/2008